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When it comes to retirement income, you can't put all your eggs into one basket. Social Security can be part of your financial picture, but you shouldn't bank on it entirely.

Millions of Americans rely on Social Security to pay their living expenses in retirement, but a frightening number of recipients count on those benefits too much. The National Academy of Social Insurance found that 65% of seniors get most of their retirement income from Social Security, and for one-quarter of recipients aged 65 and up, those monthly benefit checks are their sole source of income.

IMAGE SOURCE: GETTY IMAGES.

Of course, there's nothing wrong with factoring your Social Security benefits into your retirement savings plan. After all, you've earned them. On the other hand, it's estimated that one-third of Americans have no independent retirement savings, which means they're taking a pretty big risk by counting on Social Security alone. If you've yet to start socking money away for retirement, here are three reasons to change your ways sooner rather than later.

1. Social Security isn't designed to sustain you in retirement

Though Social Security serves as a crucial source of income for millions of retirees, it was never supposed to be seniors' only source of income. In fact, the Social Security Administration itself states that its benefits will replace about 40% of the average worker's previous income. Most people, however, need 70% to 80% of their former income to cover their living expenses in retirement, especially when you consider the astronomical cost of healthcare. And while those who live frugally might get away with a lower threshold, generally speaking, 40% income replacement target just won't cut it.

2. Social Security does a poor job of keeping up with inflation

Back in 1972, Congress enacted a provision for automatic annual cost-of-living adjustments, or COLAs, for Social Security beneficiaries. The purpose of COLAs is to help protect seniors from the effects of inflation by gradually increasing benefits. The problem, however, is that in recent years, seniors' actual expenses have outpaced their COLAs.

According to a recent study by The Senior Citizens League, Social Security beneficiaries have lost 23% of their buying power since 2000. And while COLAs were at one point far more generous (1980 saw a 14.3% increase in benefits), the past few years in particular have left seniors reeling. Beneficiaries saw no COLA going into 2016, and 2017's 0.3% COLA is so small it's almost laughable (not to mention that Medicare enrollees won't see it anyway, since their meager increase will be swallowed by higher Medicare premiums). Despite the fact that Social Security is supposed to keep up with inflation, in practice it has fallen short.

3. Social Security benefits might get cut down the line

According to the Social Security Board of Trustees' latest report, the program's combined trust funds will run out in 2034. When this happens, the program will have to rely on incoming taxes to continue paying benefits. Now this isn't to say that Social Security will be going away come 2034, but it does mean that anticipated tax revenues will probably only cover 75% of scheduled benefits. In the absence of reform to the program, future recipients might lose out on 25% of the benefits they'd otherwise be entitled to.

Bridging the gap

Since Social Security most likely won't provide enough income once you're retired, you'll need to take steps to save on your own. This could mean signing up for your employer's 401(k) plan or opening an IRA.

Ideally, you should aim to put away at least 10% of each paycheck, and the sooner you begin saving, the more time you'll give your money to grow. Not only that, but starting at an earlier age will give you the option to pursue more aggressive investments, like stocks, which have historically proven to yield the greatest returns. Stocks become a more dangerous prospect as you near retirement, but if you start buying them when you're young, you'll have plenty of time to ride out the market's ups and downs.

So just how early should you start saving for retirement? Believe it or not, it pays to begin from the moment you receive your first paycheck. The following table shows how much money you stand to accumulate if you start putting aside just $300 each month for retirement at various ages and investing that money in stocks:

If You Start Saving $300 a Month at Age:

Here's What You'll Have by Age 67 (Assumes an 8% Average Annual Return):

22

$1.4 million

27

$932,000

32

$620,000

37

$408,000

42

$263,000

47

$165,000

52

$98,000

57

$52,000

TABLE AND CALCULATIONS BY AUTHOR.

Clearly, there's a real danger in waiting too long to begin saving, but notice the difference between starting at 22 as opposed to 10 years later. By saving an extra $36,000 over 10 years, you'll add a whopping $771,000 to your nest egg thanks to the beauty of compounding. That, coupled with your Social Security benefits, could make for a very comfortable retirement.

While there's no reason to fear that Social Security is going away anytime soon, counting on it too heavily could mean setting yourself up for failure in the long run. You're better off saving independently and using those checks as they were initially intended -- to supplement your income for a retirement that's free of financial stress.

Author

Maurie Backman is a personal finance writer who's passionate about educating others. Her goal is to make financial topics interesting (because they often aren't) and believes that a healthy dose of sarcasm never hurt anyone. In her somewhat limited spare time, she enjoys playing in nature, watching hockey, and curling up with a good book.